China’s foreign exchange regulator released new rules that require banks to flag risky trades, including those involving cryptocurrencies, which would make it more difficult for mainland investors to buy and sell bitcoin and other digital assets.
Banks are expected to monitor and report “risky foreign exchange trading behaviours”, including underground banks, cross-border gambling and illegal cross-border financial activities involving cryptocurrencies, according to last week’s announcement by the State Administration of Foreign Exchange.
The rules, applicable to local banks across mainland China, also require them to track such activities based on the identity of the institutions and individuals involved, source of funds and trading frequency, among other factors.
In addition, banks are required to put in place risk-control measures that cover those entities and restrict provision of certain services to them, the regulator said.
The latest rules reflect how Beijing continues to exercise draconian regulation to root out commercial cryptocurrency activities, such as bitcoin trading and mining, as the digital asset is considered a threat to the country’s financial stability.
“The new rules will provide another legal basis for punishing cryptocurrency trading,” Liu Zhengyao, a lawyer at ZhiHeng law firm in Shanghai, wrote in a WeChat post last week. “It can be foreseen that mainland China’s regulatory attitude towards cryptocurrencies will continue to tighten in the future.”
